Netflix Is Now Worth Almost As Much As Disney

Netflix Is Now Worth Almost As Much As Disney.

After reporting impressive first-quarter subscriber growth that drove its stock higher more than 9% on Tuesday, Netflix Inc. (NFLX) is now worth nearly as much as the much older and larger Walt Disney Company (DIS) .

Netflix, which went public in May 2002, ended the day valued at just under $146 billion, compared to Disney's market cap of $153.6 billion. Disney's revenues dwarf those of Netflix's, having made $55.7 billion in the last 12 months compared to just $11.7 billion for Netflix. But Netflix has been growing significantly faster and is consequently valued much more highly by investors. Netflix's forward price-to-earnings ratio is 78, according to Thomson Reuters, versus just 14 times future earnings for Disney. 

Netflix shares have soared 75% this year alone, compared to Disney's 5% decline, and as Netflix nears Disney's market cap, it is gearing up for a head-to-head streaming battle with the Mouse House.

Brookfield GGP Bid Financing - Brookfield Gets Calpers, TIAA Financing for GGP Deal

Brookfield Property Partners LP has lined up a slate of heavyweight backers to help finance its planned takeover of GGP Inc. The California Public Employees’ Retirement System, a CBRE Group Inc. unit, Future Fund and TIAA affiliate TH Real Estate have agreed to invest in select GGP malls, according to people with knowledge of the matter. The properties weren’t identified.

Expect BPY to close GGP deal by Sep 2018 and if things go well it may be feasible by Jun 2018.

Berkshire Hathaway Book Value and Intrinsic Value Update

Berkshire Hathaway Book Value and Intrinsic Value continue to grow slowly and steadily. At 4Q2017 Book Value per BRK.B share is $141 and Intrinsic Value projected stands at $200 per BRK.B share thanks to the reduced corporation tax rate in US.

Berkshire Hathaway value can be derived as a sum of parts based on Equity Investments per share + Cash and Fixed Income securities per share + Subsidiary company value per share. As of 2017 year end Equity Investments (Including Kraft Heinz) total $196B which equates to close to $80 per share. The cash position and fixed income securities at year end is $116B which equates to $47 per share. Berkshire private owned investments including Insurance, BNSF Railway, BH Energy, Manufacturing and Retailing companies continue to perform well. BRK Insurance float increased to $115B which is $46 per share in float although due to major events the insurance division generated a net loss for the year. Increased market share and premiums imply likely profits in next few years assuming no major catastrophe events. We can expect BRK to generate $30B in annualized cash earnings in 2018 and beyond with possible growth as the $116B net cash is invested productively.

We expect 2018 year end BRK.B Book Value to be $155 and Fair Value to be in the range of $215 to $225. We expect 2022 year end Fair Value per share to range between $275 to $350. This is a good return for a conservatively run company with businesses with moderate exposure to technology disruption. 

Read Berkshire 2017 Annual Report for further details.

Brookfield Continues to Compund Wealth

Brookfield Asset Management (BAM) Continues to Compund Wealth at a steady pace.

Brookfield Assets per share Excluding Corporate Level Debt and Preferred Shares increased to $25. At a recent price of $39 this implies $14 value for Asset Management Franchise. This is a significant discount to the intrinsic value which has $1.5B annualized Fee Revenue and $1B aanualized Target Carried Interest and has significant growth potential.

BAM Fee Bearing AUM has increased from $77B in 2013 to $126B in 2017 which is a 13% CAGR. In the mean time Fee Related Earnings have increased from $300M in 2013 to $896M in 2017 which is a 31% CAGR. With Brookfield expected to raise flagship funds in RealEstate and PrivateEquity in 2018 and new Infrastructure Fund in 2019 it is very much feasible to grow the Fee Bearing AUM to $200B over the next 5 years. This would imply Fee Related Earnings could be in range of $1.5B to $2.0B range annualized depending on margin improvement potential. There will also be valued ascribed to Carry from 2022 onward as past funds mature.

Consistent growth in Net Invested Capital from $25 per share in 2017 to $40 per share in 2022 is feasible as BIP, BPY, BEP, BBU continue to grow the business through organic investments, new acquisitions and capital recycling.

Acquisition of GGP by BPY if closes at a reasonable valuation there is more upside potential.
See 4Q2017 BAM Results in detail.

Estimated BAM Fair Value by 2018 end is $50 per share with buy under price recommended at $39.
Estimated BAM Fair Value by 2022 end is $75+ per share.

Amazon Widening Moat With Prime, Alexa And Echo Integration

Sentiment rings true in Seeking Alpha article by Gary Bourgeault Amazon Widening Moat With Prime, Alexa And Echo Integration

Amazon (AMZN) thesis continues to be that the company is innovative and is well run and dominant in industry segments that have large market sizes including Retail (E-Commerce), IT Infrastructure and Services, Advertising, Entertainment. The company can grow in these markets with disruption and also seamlessly enter new adjacent markets over time and its innovation ability and competitive differentiation including Alexa, Prime and Logistics are key drivers.

Major threats to Amazon are Regulations and Government Interventions.

Mritik Capital Top Picks for 2018

Mritik Capital Top Picks for 2018 Include the following.

1. Brookfield Asset Management (BAM) Recommend Buy Under $42
2. Brookfield Property Partners LP (BPY) Recommend Buy Under $21.50
3. Brookfield Property Partners LP (BIP) Recommend Buy Under $42
4. Brookfield Renewable Partners LP (BEP) Recommend Buy Under $25
5. Brookfield |Business Partners LP (BBU) Recommend Buy Under $30
6. Berkshire Hatheway Inc (BRK-B) Recommend Buy Under $175]
7. Amazon Inc (AMZN) Recommend Buy Under $950]
8. Google Inc (GOOGL) Recommend Buy Under $930
9. Canadian National Railway Inc (CNI) Recommend Buy Under $72
10. Liberty Global Inc (LBTYA) Recommend Buy Under $30

To get the full list of 2018 picks and to subscribe to  subscribe by contacting Mritik Capital Equity Advisor Newsletter and Alerts

Brookfield Private Equity Business Starts 2018 with a Bang!

Brookfield Asset Management (BAM) to reach the $500B AUM target by 2022 needs to make great strides in Private Equity. Brookfield Business Partners LP (BBU) Starts 2018 with a Bang!

BBU announced two deals in first week of Jan 2018.

1. Brookfield to Buy Westinghouse Nuclear Business and Brookfield Goes Nuclear.
2. Brookfield to buy 75 pct stake in Schoeller Allibert for $310 mln

Mritik Capital Top Pick is up 100% from Jan 2016 to Jan 2018. Even at $38 per unit price BBU has potential to deliver huge upside if Graftech and North American Palladium investments can be exited at good valuation in the ongoing commodity upcycle.